The pensions mis-selling scandal and the problems with Equitable Life have prompted many people to lose confidence in the pensions industry and decide to trust to luck.

Ian Bell, pensions specialist at the Crawley office of accountants Baker Tilly, says every day seems to bring news of another company closing its final salary (defined benefit) pension scheme.

He says defined benefit schemes represent a tremendous benefit to employees and have typically been provided by the country's larger employers.

In these schemes, the employer takes all of the funding risk to guarantee a certain level of pension to employees at the end of their working lives.

In recent times, these schemes have become expensive for employers to provide.

Mr Bell says: "We now live longer and pensions need to be paid for a longer period following retirement. The regulatory environment has also greatly increased and added to the cost of administering schemes.

"The Government has removed certain tax breaks for scheme income and, to make matters worse, stock market returns are currently low and showing little sign of recovery."

The new accounting standard, FRS17, is taking the blame for the closure of these schemes. Yet FRS17 hasn't changed anything.

The only difference is company accounts now clearly demonstrate exactly how much the pension scheme is costing.

"Many companies have reported large deficits in their pension funds under FRS17 and it's hardly surprising companies are closing these schemes and switching to cheaper alternatives."

In switching, Mr Bell says, companies were moving towards defined contribution schemes (where the funding risk sits with the employee not the employer).

But on their own, these were unlikely to deliver the benefits people believed, or expected, to get at retirement. Something else is needed. So is there a pensions time bomb ticking?

Mr Bell says: "The Government has recognised the position for some time and, when it came to power in 1997, declared its intention to increase the proportion of pensions funded privately from 40 per cent to 60 per cent."

Stakeholder pensions were introduced to allow easy access to private pension provision but, to date, take up by the low to middle earnings band has been low. There was also doubt the level of contribution to the stakeholder plans was sufficient to provide a reasonable pension.

In its first Budget, the Government removed the ability of pension funds to reclaim tax on their dividend receipts and removed £5 billion a year from the industry.

In 1997, when stock market returns were high, the impact of this change was not significant but in the current environment, this stealth taxation is now taking its toll and is part of the reason for the closure of schemes by employers.

The next six months will be a testing time for the Government in this area. The Secretary of State for Work and Pensions Andrew Smith will have his hands full.

Compulsory contributions by employers and to a lesser extent employees will be on the agenda and, however necessary, will not be popular.

Mr Bell can be contacted at 01293 565165 or ian.bell@bakertilly.com.